Sell in May and Go Away?

May 31, 2023

May has historically been a difficult month for stocks with an average return of 0%.  You may have heard the old adage “sell in May and go away” that harkens back to a time when money managers would move into cash before heading out for their summer vacations.  Modern connectivity has made that unnecessary, but there is still a tendency to raise cash ahead of the summer vacation season.  News during the month was primarily focused on the debt ceiling limit and whether Congress would agree to pay bills they had incurred, or default for the first time in history.  In the past 63 years we have had this discussion an amazing 78 times and 78 times Congress has voted to raise the ceiling.  It is a high stakes game of “chicken” that really can only end one way….pay the bills!  However, the negotiations weighed on the market early in the month, but pushed the S&P 500 to a 9-month high after an agreement was announced.  At the end of the month the S&P 500 was up just .3% and is now 8.9% higher for the year, but the more representative “equal weighted” S&P index, that takes away the benefit of a handful of major tech stocks, was down 3.8% for the month and is 1.1% lower on the year.  Concerns about a slowing global economy sent oil prices down 11% to the lowest monthly close since December 2021 and gold ended the month down 1.7%.  Interest rates reversed 2 months of declines and moved fractionally higher.

We began the month with news the FDIC had taken over First Republic Bank and sold most of its valuable assets to J P Morgan Chase.  Chase CEO Jaime Diamond suggested this should stabilize the regional bank sector, but the regional bank ETF hit a 2 1/2 year low on the second day of trading as investors wondered “who is next”?  The Federal Reserve did, as expected, raise interest rates by another 25 basis points mid-week.  On Friday buyers stormed into the beaten down regional banking stocks helping the S&P 500 gain nearly 2%, which left the widely followed index down .8% in what was a tough week for stocks.  The second week featured relatively quiet trading as investors watch the debt ceiling debate.  The big story of the week was an earnings report from Disney that sent that stock to a new 2023 low.  At week’s end the S&P 500 was down another .3%.  After trending lower during the first 2 weeks of the month, the third week saw a better tone to the regional bank stocks and a growing belief a debt ceiling deal could get done.  The news pushed the S&P 500 back into the black for the month and to levels not seen since August of 2022.  The S&P 500 was up 1.6% for the week.  The last full week of the month was filled with debt ceiling news and a blowout earnings report from tech giant Nvidia that sent those AI driven shares to an all-time high and helped the S&P 500 gain another .3%.  We ended the month with the long Memorial Day weekend and news a debt ceiling agreement had been reached.

June begins a 3-month period that has historically seen the market perform well.  Summer rallies are the norm, but light volume is also the norm as many are away on vacation and that can lead to more volatility.  In 2023 the market has been led higher by just a handful of technology stocks while the remainder of the market is flat to lower.  The blue-chip dividend paying stock indices are down anywhere from 5% to 9% while the tech heavy NASDAQ is up more than 20%.  This divergence is unnatural and unsustainable, and we would expect at some point to see profit taking in tech stocks and a move back to value.  The price to earnings ratio of the S&P 500 is currently above 24 while the historic norm is around 16.  The Federal Reserve wants to see the economy slow and they will be successful.  Despite the 9-month high for the overall market, we believe continuing to be defensive is the prudent approach.  We still have an inverted yield curve and that has typically been a precursor to a recession.

If you know someone who would be interested in learning more about Greenberg Financial Group, please contact us at 520-544-4909, or visit our website at www.greenbergfinancial.com. As always, the key to successful investing is to have a portfolio that is consistent with your investment objectives and risk tolerance. We invite you to listen to our weekly Money Matters radio show which airs every Sunday Morning from 8:00 AM to 10:00 AM on KNST AM 790.  You can also listen to us on iHeart radio, follow us on Twitter @gbergfinancial or on Facebook under Greenberg Financial Group.  Previous radio shows are available by going to www.iheart.com or using the iHeart app and typing Money Matters with Dean Greenberg.

Daily Updates

July 22, 2022.

Stocks ended the day lower with the DOW, S&P, and...

July 15, 2022.

Stocks ended the week higher, with the DOW, S&P and...

May 17, 2022.

U.S. stocks closed up today as the market bounced back...

Monthly Updates

More New All-Ti.

January was the 3rd consecutive positive month for the S&P...

New All-Time Hi.

January is traditionally a good month for the market as...

Longest Continu.

The period from November 1st through the last day of...

Stay up to date with our newsletter